In the merchandising sector ________.
A) only variable costs are subtracted to determine gross margin
B) fixed overhead costs are subtracted to determine gross margin
C) fixed overhead costs are subtracted to determine contribution margin
D) all operating costs are subtracted to determine contribution margin

Question

Quizplus · Accepted Answer

Gross margin is calculated by subtracting only the variable costs (cost of goods sold) from sales revenue, not fixed costs or all operating costs. Fixed overhead costs are considered later in the income statement to calculate operating income, not gross margin.

In the Merchandising Sector ________